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QUESTION 1 A company had net income of $252.000. Depreciation expense was $26,000. During the year, accounts receivable and i

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Answer #1

1.

Statement of cash flow (Partial)

Operating activities
Net income 252,000
Depreciation expense 26,000
Loss on sale of equipment 3,000
Accounts receivable increase -15,000
Inventory increase -40,000
Prepaid expense decrease 2,000
Accounts payable decrease -4,000
Net cash flow from operating activities $224,000

Correct option is (d)

2.

Statement of cash flow (Partial)

Operating activities
Net income 175,000
Depreciation expense 28,000
Accounts receivable increase -16,000
Accounts payable decrease -21,000
Net cash flow from operating activities $166,000

Correct option is (d)

3.

On the statement of cash flows prepared using the indirect method, a $7,500 gain on sale of fixed assets would be deducted from the net income in converting the net income reported on the incoome statement to cash flows from operating activities.

Correct option is (c)

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